In a report published Tuesday, Citi analyst Jim Suva downgraded Xerox (NYSE: XRX) from Buy to Neutral given the run-up in share price over the past year.
Over the past 12 months, shares of Xerox have gained 35 percent versus the 20 percent increase seen by the S&P 500. The stock is within five percent of Citi's price target of $13.00.
Suva wrote, "With shares now trading at 10x NTM P/E and near term concerns associated with the loss of the Nevada health exchange contract and Texas Medicaid contract, partially offset by the Medicaid contract win in NY, we believe near term upside to EPS estimates or multiple expansion remains limited.
"To be clear, we applaud XRX's continued efforts to transform itself to a services related organization (with services now representing more than 55% of total revenues) given secular challenges in print hardware, FCF generation and shareholder returns (7% including buybacks and dividends) but at current multiples we believe the shares are adequately valued and reflect near terms risks associated with the loss of these contracts and implementing a large contract in a newer state which tends to have high initial start-up costs."
The firm estimates that EPS will come in at $0.26, in-line with management's guidance of $0.25- $0.27.
Shares of Xerox closed at $12.44 on Monday. The stock is currently down about 0.24 percent Tuesday morning.
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